Given that the last year saw the largest refinancing wave in the history of the single-family mortgage market, GNMA multifamily prepayment speeds over the past year have been fairly tame. This 12-month period covers April 2001 through March 2002, a period of historically low interest rates. Assuming a two-month time lag from rate-lock to closing for a project loan refinancing, the corresponding period for rate locks was February 2001 through January 2002, a period in which the 10-year Treasury yield ranged from 4.18 to 5.52 and averaged just 4.99. No production year except 1990 (which was likely inflated by the recent expiration of most prepayment penalties) had a one-year speed exceeding 24% CPR, and even 1990's 30.9% CPR was mild compared to premium single-family speeds. While there was some tendency of the highest coupon pools in the 1993-96 cohorts to prepay faster, overall prepayments were only modestly correlated with pool interest rate. The other motivation for refinancing, taking out equity, dominated, especially with the major increase in the value of real estate during the strong economy of the mid-to-late 1990's.

The last year's prepayment speeds give a good indication of how GNMA multifamily pools prepay in a relatively low interest rate environment. To get an indication of how they prepay in a much higher rate environment, we examine the one-year historical CPRs of the GNMA multifamily universe, broken down by production year and pass-through coupon, for the 12 months from July 1994 through June 1995. This period represents the interest rate peak of the past decade; the corresponding rate-lock period (assuming a 60-day lag) was May 1994 through April 1995, during which time the 10-year Treasury yield ranged from 6.91 to 8.03, and averaged 7.43. For that period, 1983 and later production had enough pools outstanding to generate a somewhat meaningful prepayment history.

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